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Transborder demand leakage and the US–Canadian air passenger market

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  • Elwakil, Omar Sherif
  • Windle, Robert J.
  • Dresner, Martin E.

Abstract

The US–Canadian air traffic market is one of the largest international markets in the world – estimated at 23million passengers in 2008. The market is currently regulated by an “Open Skies” agreement, which eliminated all restrictions on the frequency of flights, the aircraft flown, and the fares charged on transborder routes. Although there is evidence that consumers have benefited from the Open Skies agreement, there is also evidence that many passengers have chosen to avoid transborder services, and instead fly from airports in US border cities and cross the border by surface transportation. This paper uses a passenger demand model to determine the scope of this “leakage” from transborder routes. In addition, transborder airfares are compared to US domestic airfares to determine whether transborder fares are “excessive”, a potential cause of the leakage. Results show a substantial amount of leakage estimated at over 4.7million passengers for 2008. Furthermore, after controlling for the impact of route-specific variables, such as market concentration, average fares are 28.2% higher in the transborder market. Finally, policy implications and the future of the transborder air passenger market are discussed.

Suggested Citation

  • Elwakil, Omar Sherif & Windle, Robert J. & Dresner, Martin E., 2013. "Transborder demand leakage and the US–Canadian air passenger market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 45-57.
  • Handle: RePEc:eee:transe:v:57:y:2013:i:c:p:45-57
    DOI: 10.1016/j.tre.2013.01.005
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    References listed on IDEAS

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    Cited by:

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    3. Hua-An Lu & Kung-Don Ye & Ming-Chen Chang, 2017. "An Empirical Evaluation for Passenger Markets Before and After Open-Sky Policy between Taiwan and Japan," International Journal of Technology and Engineering Studies, PROF.IR.DR.Mohid Jailani Mohd Nor, vol. 3(1), pages 29-37.
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